AUS: McGuigan safe from growers legal threat
Brian McGuigan, the founder of Australian wine group McGuigan Simeon, has insisted the company will not face a court battle with growers over cancelled grape contracts.
Late last year, McGuigan Simeon decided to suspend or not renew contracts due to excess supply in Australia's wine industry and a slump in domestic wine sales.
McGuigan, who retired as chief executive in February but remains on the company's board, said growers had been aware that the contracts could be suspended if Australia was hit by a wine glut.
"The growers were upset with us but we handled them in a deft way because we told them three years ago the issue of over-production in the Australian wine industry would come to the fore," he told just-drinks yesterday (17 May).
"We had provisions within the contracts to suspend them should we reach over-production. We were absolutely within our rights - they (the growers) signed the contracts. We will not be challenged."
In February, the company saw half-year earnings hit by margin pressures, posting a 41% slump in earnings. Revenues fell 6% as rising exports, particularly to the UK, were not enough to offset a fall in domestic sales. However, McGuigan insisted the company was "performing better than anyone else in the Australian wine industry".
He said: "In 2005, we were only A$4m (US$3.1m) under our 2004 results but A$300m was taken off our capitalization. The situation in the industry is glum and expectations have gone the same way and people write down shares. In total our sales were around A$400m, which is pretty good, given the age of the company and an environment where there is discounted stock."
McGuigan said he was happy in his role as an "ambassador" for the company, the third-largest in Australia's wine industry, and had acted in a consultative capacity to his successor, Dane Hudson.
Hudson joined after being senior vice-president at Yum Brands but his lack of wine experience was not a problem, according to McGuigan, who said the appointment was a sign that companies were looking outside the industry to find new ways to connect with consumers.
"Perhaps the industry needs to think of fresh ways of how to stay in touch with the consumer of today rather than using yesterday's philosophy."
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